Clinton’s Band-Aid Approach to Medicare Reform

President Clinton has finally offered his new plan for Medicare, but it isn’t clear why he calls it a “reform” package. Clinton’s Medicare solutions are about as effective as several small band-aids on an Ebola patient. His two big ideas – expanding Medicare and spending projected surplus tax revenues – will likely make Medicare’s long-term problems worse.

Medicare is in the fast lane on the road to bankruptcy. President Clinton and Congress have proposed several different Medicare reform plans, hoping to save the program. Last year, Medicare spent $9 billion more than it received in tax revenues, and its Hospital Insurance Trust Fund will be empty by the year 2015. And even though the program spends more than $200 billion per year, most retirees are forced to buy supplemental insurance for services not covered by Medicare.

So, even though Medicare doesn’t have the money necessary to take care of the Baby Boom generation, Mr. Clinton wants to add a major new benefit: outpatient prescription medicine. He proposed a new program – to be called Medicare Part D – just to administer this benefit. Everyone wants seniors to have the medicines they need, but is the best solution more bureaucracy?

In reality, this new program is a solution in search of a problem. First of all, Medicare already provides prescription drug coverage for seniors undergoing inpatient hospital care, for those in nursing facilities recovering from a hospital stay, and for those in hospices facing terminal illnesses. In addition, two-thirds of seniors have outpatient prescription drug coverage through employer-sponsored insurance, supplemental Medigap insurance, Medicare HMOs, state programs, or other sources. And finally, Medicaid covers prescription drugs for low-income seniors.

Instead of targeting the seniors who need coverage but don’t have it, the Clinton plan gives a limited benefit to all seniors, regardless of whether they need more coverage. Retirees that already have private coverage should not be forced into a government-run program. Since Medicare cannot afford this additional spending, President Clinton wants seniors to pay new monthly premiums and to take funds from the projected budget surplus.

This, then, is the President’s second big idea of “reform”: shoring up the Medicare Trust Fund with promises of billions of extra tax dollars – far in the future. Right now, we pay a 2.9 percent tax directly out of our paychecks to fund seniors’ hospital stays and care in hospices and skilled nursing facilities. The president’s plan would take $800 billion over the next 15 years from the general budget surplus to supplement these funds.

Just like the outpatient drug proposal, this program seems like a fine idea – at first. But as Senator John Breaux (D-LA) said, “Throwing more money into this 1965 program is like putting more gas in an old car, it still runs like an old car. Above all, we need to give this car a major overhaul first.” Even if Medicare receives an extra $800 billion, after these 15 years, it will still be a broken, bureaucratic, and wasteful system.

The Clinton plan also entails dozens of minor alterations to Medicare’s payment and management structure that would make it even more complex, contradictory, and confusing. For example, he would extend the Medicare reimbursement cuts made in 1997 for an additional five years, but also create a new fund to undo some of these payment restrictions. As another example, seniors’ $100 annual deductible for doctors’ services would be indexed to inflation, causing it to rise two or three dollars per year, but they would no longer have co-payments for preventive services such as mammographies and prostate cancer screenings. On the other hand, there would be a new 20 percent co-payment for clinical lab tests.

Though the President would like to make many minor alterations to the fabric of Medicare, it would remain a one-size-fits-all program. Seniors would be stuck with the package of benefits that politicians want to give them. Most seniors would still need to buy additional insurance to cover the gaps in Medicare coverage. And Medicare’s bankruptcy would still loom in the not-too-distant future. Seniors shouldn’t fall for a scam like this one.

Real Medicare reform requires giving seniors what they need – more choices. After paying into the system for over three decades, they should be able to use Medicare’s limited funds to select the type of coverage that is right for their individual circumstances. For example, while some seniors will want outpatient prescription drug coverage, others would prefer insurance for long-term nursing home care – something Medicare doesn’t cover. Some seniors may need low deductibles and co-payments, while others may want catastrophic coverage.

Federal employees and members of Congress currently enjoy these choices (and many more). Even though there is a bipartisan plan in Congress to extend these options to Medicare beneficiaries, the President’s plan would give more power to government bureaucrats instead of seniors. Why does President Clinton want to deny America’s seniors these choices?


This article appeared in the Commentary section of The Washington Times on Friday, July 9, 1999.

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